What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-08 · 137 added, 104 removed, 357 unchanged (40% of the section changed)

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(“Motif”) was formed to focus on the application of synthetic biology to reduce the reliance on animal products in the food industry.

We entered into an intellectual property contribution agreement that granted Motif rights to our intellectual property, subject to mutually agreed upon technical development plans.

We entered into (i) an Intellectual Property Contribution Agreement (“IPCA”) with Motif that granted Motif a license to certain of the our intellectual property and (ii) a Technical Development Agreement (“TDA”) that established the terms under which the we provided technical development services.

In return for our contribution of intellectual property and access to our platform, we received shares of common stock in Motif.

The initial fair value of our common stock investment in Motif was $65.1 million, which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments.

Motif was capitalized through Series A preferred stock financings that raised approximately $119 million in gross proceeds from an investor group which included certain of our investors, Louis Dreyfus Company and Fonterra Co-operative Group Limited.

In June 2021, Motif raised an additional $226 million through a Series B preferred stock financing.

Ginkgo also entered into a Technical Development Agreement with Motif under which we provide R&D services in return for cash consideration on a fixed-fee or cost-plus basis.

The initial fair value of the common stock investment in Motif was $65.1 million, which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under the accounting for equity method investments.

The initial non-refundable fair value of the equity received, totaling $65.1 million and considered non-cash consideration under ASC 606, was accounted for as material rights under ASC 606.

The material rights pertained to Motif's license rights for a set of ingredients that Motif intended for us to develop within the first two years.

This amount was recorded as deferred revenue for the future license rights and recognizable as revenue as we performed qualifying services for Motif, or when such rights expire upon termination of the agreements.

As of December 31, 2023, we had a remaining deferred revenue balance of $45.4 million with Motif under this arrangement.

Effective in August 2024, the Motif IPCA and the TDA agreements were mutually terminated with no adjustment to the original consideration.

As a result, we have no further obligation to perform services for Motif and, accordingly, the remaining $45.4 million in deferred revenue under this arrangement has been recognized in full as revenue in the three and nine months ended September 30, 2024.

We separately disclose all the non-cash portion of our revenue in the results of operations section below.

Allonnia, LLC

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In 2023, Allonnia raised an additional $30 million through a Series A extension.

Ginkgo also entered into a Technical Development Agreement with Allonnia under which we provide R&D services in return for cash consideration on a fixed fee or cost-plus basis.

Ginkgo also entered into a Technical Development

Agreement with Allonnia under which we provide R&D services in return for cash consideration on a fixed fee or cost-plus basis.

Founded in 2021, Arcaea, LLC (“Arcaea”) was formed to focus on the application of synthetic biology in the beauty and personal care products industry.

In March 2021, we entered into an intellectual property contribution agreement that

granted Arcaea rights to our intellectual property, subject to mutually agreed upon technical development plans.

In March 2021, we entered into an intellectual property contribution agreement that granted Arcaea rights to our intellectual property, subject to mutually agreed upon technical development plans.

In return for our contribution of intellectual property and access to our platform, we received common units in Arcaea with a right to additional units subject to additional closings of Arcaea’s Series A preferred units.

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BiomEdit was capitalized through a Series A preferred unit financing that raised approximately $32.5 million in gross proceeds from an investor group which included one of our investors.

In April 2022, we entered into an intellectual property contribution agreement that granted BiomEdit rights to our intellectual property, subject to mutually agreed upon technical development plans and, in return, we received 3.9 million voting common units in BiomEdit.

In April 2022, we entered into an intellectual property contribution agreement that granted BiomEdit rights to our intellectual property, subject to mutually agreed upon technical development

plans and, in return, we received 3.9 million voting common units in BiomEdit.

In addition, Elanco Animal Health also contributed intellectual property in exchange for 3.9 million non-voting common units in BiomEdit.

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and (ii) partner with existing entities with complementary assets for high potential synthetic biology applications in a large-scale, multi-program collaboration (“Legacy Structured Partnership”).

In the three and six months ended June 30, 2023, we entered into two and six, respectively, Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments totaling $1.1 million and $17.0 million, respectively, that is recognized as revenue over our period of performance.

In the three and six months ended June 30, 2024, we did not enter into any new Startup Structured Partnerships.

In the three and nine months ended September 30, 2023, we entered into zero and six, respectively, Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments totaling $17.0 million that is recognized as revenue over our period of performance.

In the three and nine months ended September 30, 2024, we did not enter into any new Startup Structured Partnerships.

Our Legacy Structured Partnerships are described below:

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In 2016 and 2018, we acquired preferred stock in Genomatica with an aggregate investment value of $55.0 million in exchange for cash and committed R&D services.

The carrying value of the investment was $7.0 million as of June 30, 2024, reflective of impairment losses recognized through that date.

The carrying value of the investment was $7.0 million as of September 30, 2024, reflective of impairment losses recognized through that date.

Synlogic, Inc.

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Effective in the second quarter of 2024, we no longer provide R&D services to Synlogic.

As of June 30, 2024, the fair value of Synlogic common stock and warrants was $0.6 million and $0.3 million, respectively.

As of September 30, 2024, the fair value of Synlogic common stock and warrants was $0.6 million and $0.3 million, respectively.

See Note 5 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details of our investments in and the material terms of our agreements with our Platform Ventures and Structured Partnerships.

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In the near-term, programs typically deliver multi-year revenue from service fees.

Over the long-term, program growth drives a physical infrastructure scale economic through our Foundry, a data and learning scale economic through our Codebase and accumulation of potential downstream value share.

Over the long-term, program growth drives a physical infrastructure scale economic

through our Foundry, a data and learning scale economic through our Codebase and accumulation of potential downstream value share.

Our key business metrics comprise New Programs, Current Active Programs, and Cumulative Programs.

Three Months Ended June 30, Six Months Ended June 30, LTM (1)

Three Months Ended September 30, Nine Months Ended September 30, LTM (1)

2024 2023 2024 2023 2024

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Cumulative Programs 280 219 280 219 280

(1) Last twelve months ended June 30, 2024

(1) Last twelve months ended September 30, 2024

New Programs represent the number of unique programs commenced within the reporting period.

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Generally, the terms of these agreements provide that we receive some combination of:

(1) service fees in the form of (i) upfront payments upon consummation of the agreement or other fixed payments, (ii) reimbursement for costs incurred for R&D services and (iii) milestone payments upon the achievement of specified technical criteria, plus (2) downstream value share payments in the form of (i) milestone payments upon the achievement of specified commercial criteria, (ii) royalties on sales of products from or comprising engineered organisms arising from the collaboration or licensing agreement and (iii) royalties related to cost of goods sold reductions realized by our customers.

(1) service fees in the form of (i) upfront payments upon consummation of the agreement or other fixed payments, (ii) reimbursement for costs incurred for R&D services and (iii) milestone payments upon the achievement of specified technical criteria, plus (2) downstream value share payments in the form of (i) milestone payments upon the achievement of specified commercial criteria, (ii) royalties on sales of products from or comprising engineered organisms arising from the collaboration or licensing agreement and/or (iii) royalties related to cost of goods sold reductions realized by our customers.

Royalties did not comprise a material amount of our revenue during any of the periods presented.

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We view the upfront non-cash consideration as prepayments for licenses which will be granted in the future as we complete mutually agreed upon technical development plans.

In these instances, we also receive cash consideration for the R&D services performed by us on a fixed fee or cost-plus basis.

In these instances, we also receive cash consideration for the R&D services

performed by us on a fixed fee or cost-plus basis.

We are not compensated through additional milestone or royalty payments under these arrangements.

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Downstream value share in the form of equity interest appreciation is not recognized as revenue but is expected to contribute to future cash flows upon liquidation, the amount and timing of which is inherently unpredictable.

The initial fair market value of the equity interests received may also decrease after contract inception and the amount of cash proceeds

eventually realized may be less than the revenue recognized.

The initial fair market value of the equity interests received may also decrease after contract inception and the amount of cash proceeds eventually realized may be less than the revenue recognized.

Equity investments are accounted for under the equity method, cost method or are carried at fair value.

Commencing in the second quarter of 2024, we announced changes in commercial terms, including new intellectual property terms in favor of customers, the removal of downstream value share from certain program types, and offering our Foundry capabilities on a lab-data-as-a-service (“LDaaS”) basis in addition to continuing our end-to-end Cell Engineering solutions offering where we will often maintain downstream value share.

Commencing in the second quarter of 2024, we announced changes in commercial terms applicable to some customer contracts, including new intellectual property terms in favor of customers and the removal of downstream value share from certain program types in many circumstances.

Our end-to-end Cell Engineering solutions offering is expected to continue to maintain downstream value share.

In the third quarter of 2024, we launched several new customer offerings, including Ginkgo Datapoints, an artificial intelligence (AI) model application programming interface (API), and lab automation solutions.

Ginkgo Datapoints' data generation products provide large, biological datasets for customers to train their AI models.

Our model API provides users with access to both publicly available models and Ginkgo’s own protein sequence large language model (LLM) trained on Ginkgo’s proprietary datasets.

Our lab automation solutions combines modular hardware, control software and managed support to provide customers the ability to automate their own lab workflows in house.

There has been no material impact on our revenue recognition policies to date from the announced changes in our new commercial terms and Cell Engineering offerings.

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We expense R&D expenses as incurred.

We expect our R&D costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we rationalize our current development programs and prioritize our investments in our Foundry, Codebase, AI and new offerings.

We experienced lower R&D costs in the third quarter of 2024 compared to the first two quarters of 2024 and comparable 2023 periods primarily resulting from our restructuring plan announced and commenced in the second quarter of 2024 as we rationalize our current development programs and prioritize our investments in our Foundry, Codebase, AI and new offerings.

The nature, timing, and estimated costs required to support our growth will be dependent on advances in technology, our ability to attract new customers, and the rate of market penetration within our existing customer industries.

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G&A expenses also include professional legal services fees and costs incurred relating to litigation, corporate, intellectual property and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, insurance costs, facility-related costs not otherwise included in R&D expenses, and asset impairments.

We expect our G&A costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we begin to lower our operational overhead.

We experienced lower G&A costs in the third quarter of 2024 compared to the first two quarters of 2024 and comparable 2023 periods primarily resulting from our restructuring plan announced and commenced in the second quarter of 2024 as we commenced lowering our operational overhead.

Conversely, we intend to maintain a strategic and opportunistic approach regarding inorganic G&A expenses arising from mergers, acquisitions, and other inorganic growth initiatives.

Impairment of Lease Assets

Impairment of lease assets relates to impairment losses recognized on a right-of-use asset and the related leasehold improvements associated with an exited Zymergen leased facility.

Goodwill Impairment

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Restructuring Charges

Restructuring charges relate to our restructuring plan announced and commenced in the second quarter of 2024 and consist primarily of severance and other employee termination costs resulting from a reduction in force that commenced in June 2024 and an impairment of a right-of-use asset relating to facilities consolidation and the related sublease of certain facilities.

Restructuring charges are related to our restructuring plan, which was announced and initiated in the second quarter of 2024.

These charges primarily consist of severance and other employee termination costs from a reduction in force that commenced in June 2024, as well as the impairment of a right-of-use asset due to facilities consolidation, including sublease of certain facilities.

Additional details are included in Note 3 , Restructuring, of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Loss on investments includes the change in fair value of our marketable equity securities in publicly traded companies and impairment losses recognized on non-marketable equity securities in privately held companies.

Loss on Deconsolidation of Subsidiary

Loss on deconsolidation of subsidiary pertains to our deconsolidation of our former foreign subsidiary Altar SAS (“Altar”) in the third quarter of 2024 as a result of a sale.

Change in Fair Value of Warrant Liabilities

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Other Income, Net

Other income (expense), net primarily consists of sublease rent income and changes in fair value of notes receivable that we elected to account for under the fair value option.

Other income, net primarily consists of sublease rent income and changes in fair value of notes receivable that we elected to account for under the fair value option.

Provision for Income Taxes

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Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.

A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all the deferred tax assets will not be

For all periods presented, we have recorded a valuation allowance against the deferred tax assets that are not expected to be realized.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

The following table presents the result of operations for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 Change

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52,292 82,028 (29,736) 188,864 295,802 (106,938)

Impairment of lease assets — 96,210 (96,210) — 96,210 (96,210)

Goodwill impairment — — — 47,858 — 47,858

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Loss on investments (6,912) (36,324) 29,412 (16,282) (44,815) 28,533

Loss on deconsolidation of subsidiary (7,013) — (7,013) (7,013) — (7,013)

Change in fair value of warrant liabilities 1,528 1,891 (363) 5,701 (1,387) 7,088

Other income (expense), net (766) 3,224 (3,990) 1,249 6,152 (4,903)

Total other income 5,954 10,903 (4,949) 18,076 21,761 (3,685)

Other income, net 1,572 2,893 (1,321) 2,821 9,045 (6,224)

Total other income (expense) (1,574) (16,520) 14,946 16,502 5,241 11,261

Loss before income taxes (56,778) (302,913) 246,135 (439,649) (681,048) 241,399

Income tax expense 190 67 123 221 149 72

Income tax expense (benefit) (375) (22) (353) (154) 127 (281)

Net loss $ (56,403) $ (302,891) $ 246,488 $ (439,495) $ (681,175) $ 241,680

(1) Total stock-based compensation expense, inclusive of employer payroll taxes, was allocated as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(1) The following table presents the allocation of stock-based compensation expense, inclusive of employer payroll taxes.

Stock-based compensation expense during the three months ended September 30, 2024, was partially offset by a $10.9 million expense reversal

resulting from the forfeiture of RSUs related to our restructuring plan.

Of the total reversal, $8.8 million was recorded to research and development expenses and $2.1 million was recorded to general and administrative expenses.

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

Research and development $ 3,214 $ 33,976 $ 48,028 $ 122,086

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Cell Engineering Revenue

Cell Engineering revenue decreased $9.1 million in the three months ended June 30, 2024 compared to the same period in 2023 and decreased $15.3 million in the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily due to timing of programs completed prior to the current period partially offset by overall progress on Current Active Programs.

Cell Engineering revenue increased by $37.9 million and $22.6 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.

The increase was primarily attributable to the progress of Current Active Programs with existing and new customers, including the recognition of $45.4 million in non-cash revenue from the release of the deferred revenue balance associated with the terminated Motif contract in the third quarter of 2024.

Additionally, revenue increased due to the launch of New Programs and was partially offset by the completion of certain programs.

As discussed above in Components of Results of Operations, Cell Engineering revenue comprises both cash and non-cash consideration.

Cell Engineering revenue recognized relating to non-cash consideration decreased from $16.8 million in the three months ended June 30, 2023 to $8.2 million in the three months ended June 30, 2024, and from $29.7 million in the

six months ended June 30, 2023 to $12.1 million in the six months ended June 30, 2024, primarily due to a shift in focus on signing new programs with cash consideration.

In the three months ended June 30, 2024, 10 New Programs commenced, compared to 21 New Programs in the same period in 2023.

Cell Engineering revenue recognized relating to non-cash consideration increased from $16.9 million in the three months ended September 30, 2023 to $48.0 million in the three months ended September 30, 2024, and from $46.6 million in the nine months ended September 30, 2023 to $60.1 million in the nine months ended September 30, 2024.

The increase was due to the recognition of $45.4 million in non-cash revenue from the release of the deferred revenue balance associated with the terminated Motif contract in the third quarter of 2024, partially offset by lower non-cash revenue from other customers.

In the three months ended September 30, 2024, 11 New Programs commenced, compared to 21 New Programs in the same period in 2023.

The number of Current Active Programs rose to 136, compared to 116 in the prior year period.

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Additionally, the number of customers grew to 81, up from 76 in the prior year period.

In the six months ended June 30, 2024, 27 New Programs commenced, compared to 34 New Programs in the same period in 2023.

In the nine months ended September 30, 2024, 38 New Programs commenced, compared to 55 New Programs in the same period in 2023.

The number of Current Active Programs rose to 162, compared to 139 in the prior year period.

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While the majority of Cell Engineering revenue today is made up of service fees, as we increase Cumulative Programs and to the extent our customers successfully commercialize products built on our platform, downstream value share is expected to comprise a larger proportion of Cell Engineering revenue.

Downstream value share in the form of equity interest appreciation is not recognized as revenue but is expected to contribute to future cash flows upon liquidation of these equity interests, the amount and timing of which is inherently unpredictable.

The initial fair market value of the equity interests received may also decrease after contract inception and the amount of cash proceeds eventually realized may be less than the revenue recognized.

Biosecurity Revenue

Biosecurity revenue decreased $15.3 million in the three months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $10.8 million and a decrease in service revenue of $4.5 million.

Biosecurity revenue decreased $51.8 million in the six months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $22.5 million and a decrease in service revenue of $29.4 million.

Biosecurity revenue decreased $4.3 million in the three months ended September 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $6.5 million offset by an increase in service revenue of $2.2 million.

Biosecurity revenue decreased $56.1 million in the nine months ended September 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $28.9 million and a decrease in service revenue of $27.2 million.

The decreases in revenue between periods is attributable to the end of our COVID-19 testing in schools in the third quarter of 2023, partially offset by new expanded offerings of biomonitoring and bioinformatic support services in the 2024 periods.

Since the end of the COVID-19 public health emergency in May 2023, we shifted our Biosecurity business focus to developing scalable biosecurity infrastructure and delivering global surveillance programs and analytics services.

Biosecurity revenue in the first half of 2024 was comprised of our expanded offerings of biomonitoring and bioinformatic support services.

Biosecurity revenue in the nine months ended September 30, 2024 was comprised of our expanded offerings of biomonitoring and bioinformatic support services.

Through our partnerships, we operate programs for collections, testing, sequencing, and insights delivery on pathogen samples in different countries.

Cost of Biosecurity Product and Service Revenue

Cost of Biosecurity product and service revenue decreased $6.3 million and $19.5 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

Cost of Biosecurity product and service revenue increased $3.1 million in the three months ended September 30, 2024 compared to the same period in 2023.

The increase was driven by growth in our expanded offerings of biomonitoring and bioinformatic support services since the conclusion of our COVID-19 testing in schools in the third quarter of 2023.

Cost of Biosecurity product and service revenue decreased $16.4 million in the nine months ended September 30, 2024 compared to the same period in 2023.

The decrease was driven by the end of our COVID-19 testing in schools in the third quarter of 2023 and the transition of our Biosecurity business to global surveillance programs and analytic services.

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Our research and development expenses principally relate to the development of new offerings and the operation, expansion and enhancement of our existing service offerings utilizing our proprietary platform, which includes our Foundry and Codebase assets, to our cell engineering customers.

Our research personnel costs, including stock-based compensation, is our largest expense, aggregating $37.6 million and $76.5 million for the three and six months ended June 30, 2024, respectively, and $38.5 million and $81.1 million for the three and six months ended June 30, 2023, respectively.

We also acquired and expensed in-process research and development through the issuance of our equity, aggregating $3.0 million and $19.8 million for the three and six months ended June 30, 2024, respectively, and $4.0 million for the three and six months ended June 30, 2023.

Our research personnel costs, including stock-based compensation, is our largest expense, aggregating $31.2 million and $152.5 million for the three and nine months ended September 30, 2024, respectively, and $70.5 million and $239.8 million for the three and nine months ended September 30, 2023, respectively.

We also acquired and expensed in-process research and development through the issuance of our equity, aggregating $19.8 million and $4.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Our remaining research and development costs are comprised primarily of rent and related facilities costs, information technology costs, depreciation pertaining to facilities and equipment, laboratory consumables, contract services and routine costs and fees.

Research and development expenses decreased $10.1 million in the three months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $18.8 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc.

Research and development expenses decreased by $79.7 million in the three months ended September 30, 2024, compared to the same period in 2023.

This decrease was primarily due to a reduction in stock-based compensation expense of $29.7 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc.

(“Zymergen”), in the fourth quarter of 2023 ($20.5 million).

Further, there was a decrease in professional fees of $3.8 million and acquired in-process research and development costs of $1.0 million.

This was partially offset by an increase in rent and related facilities costs of $10.5 million, software and technology expense of $5.2 million, laboratory supplies expense of $4.5 million, personnel-related compensation and benefits expense of $3.0 million, and non-capitalized equipment purchases and maintenance costs of $2.1 million.

Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.

Research and development expenses decreased $36.2 million in the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $40.8 million (inclusive of employer payroll taxes) and the deconsolidation of Zymergen ($30.0 million).

Further, there was a decrease in professional fees of $8.6 million and temporary labor and contractors of $1.4 million.

This was partially offset by increases in acquired in-process research and development costs of $15.9 million, rent and related facilities costs of $11.0 million, software and technology expense of $8.9 million, laboratory supplies expense of $4.8 million, and personnel-related compensation and benefits expense of $4.4 million.

Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.

Additionally, there were decreases in lab equipment impairment of $12.3 million, personnel-related compensation and benefits expense of $4.8 million, software and technology expense of $2.9 million, professional fees of $2.8 million, and laboratory supplies of $1.4 million.

Research and development expenses decreased by $115.9 million in the nine months ended September 30, 2024, compared to the same period in 2023.

This decrease was primarily due to a reduction in stock-based compensation expense of $70.4 million (inclusive of employer payroll taxes) and the deconsolidation of Zymergen ($50.5 million).

Additionally, there were decreases in professional fees of $11.4 million, lab equipment impairment of $12.3 million, and temporary labor and contractors of $2.2 million.

These decreases were partially offset by an increase in acquired in-process research and development costs of $15.9 million, rent and related facilities costs of $11.4 million, software and technology expense of $6.0 million, laboratory supplies of $3.3 million, and outside service costs of $3.1 million.

Increases in research and development expenses supported the growth of Cell Engineering capabilities prior to the commencement of the restructuring.

General and Administrative Expenses

General and administrative expenses decreased $36.1 million in the three months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to the deconsolidation of Zymergen ($34.3 million) and a decrease in stock-based compensation expense of $3.7 million (inclusive of employer payroll taxes).

Further, there was a decrease in professional fees of $5.6 million, partially offset by increases in personnel-related compensation and benefits expense of $5.1 million and depreciation and amortization expense of $1.6 million.

General and administrative expenses decreased $77.2 million in the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to the deconsolidation of Zymergen ($55.4 million) and a decrease in stock-based compensation expense of $12.1 million (inclusive of employer payroll taxes).

Further, there were decreases in professional fees and litigation costs of $13.9 million and the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.2 million, partially offset by an increase in personnel-related compensation and benefits expense of $10.1 million.

General and administrative expenses decreased $29.7 million in the three months ended September 30, 2024, compared to the same period in 2023.

The decrease was primarily due to the deconsolidation of Zymergen ($17.4 million) and a reduction in stock-based compensation expense of $8.7 million (inclusive of employer payroll taxes).

Additionally, there were decreases in professional fees of $8.8 million and temporary labor and contractors of $2.4 million.

These decreases were partially offset by an increase in rent and related facilities costs of $8.3 million from a new facility lease that commenced in the second quarter of 2024.

General and administrative expenses decreased $106.9 million in the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease was primarily due to the deconsolidation of Zymergen ($72.8 million) and a reduction in stock-based compensation expense of $20.7 million (inclusive of employer payroll taxes).

Additionally, there were decreases in professional fees of $22.7 million and the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.5 million, partially offset by an increase in personnel-related compensation and benefits

expense of $11.0 million and rent and related facilities costs of $8.3 million from a new facility lease that commenced in the second quarter of 2024.

Impairment of Lease Assets

In the three and nine months ended September 30, 2023, we recognized an impairment loss of $96.2 million related to a right-of-use asset and the associated leasehold improvements for an exited Zymergen leased facility.

During the third quarter of 2023, Zymergen ceased use of and vacated the leased space, which triggered an impairment analysis and resulted in a write-down of the carrying value of the assets to their estimated fair value.

Goodwill Impairment

During both the three and six months ended June 30, 2024, we recorded goodwill impairment expense of $47.9 million related to our Cell Engineering reporting unit, further discussed within “Critical Accounting Estimates” below.

During the nine months ended September 30, 2024, we recorded goodwill impairment expense of $47.9 million related to our Cell Engineering reporting unit, further discussed within “Critical Accounting Estimates” below.

Restructuring Charges

During both the three and six months ended June 30, 2024, we incurred restructuring charges of $17.1 million in connection with our restructuring plan announced and commenced in the second quarter of 2024, primarily in the Cell Engineering segment.

These charges primarily consisted of $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.

During the three and nine months ended September 30, 2024, we incurred restructuring charges of $2.9 million and $20.0 million, respectively, in connection with our restructuring plan announced and commenced in the second quarter of 2024, primarily in the Cell Engineering segment.

These charges primarily consisted of employee termination costs from the reduction in force commenced in June 2024 and the impairment of a right-of-use asset relating to facilities consolidation.

See Note 3 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Interest Income, Net

Interest income, net decreased $4.0 million and $6.9 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

Interest income, net decreased $5.8 million and $12.6 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.

The decrease was primarily due to lower average cash balances in interest bearing accounts.

Loss on Equity Method Investments

Loss on equity method investments was $0.1 million and $1.5 million for the three and six months ended June 30, 2023, respectively.

Loss on equity method investments was zero and $1.5 million for the three and nine months ended September 30, 2023, respectively.

No loss on equity method investments was recognized in 2024.

In the six months ended June 30, 2023, we recorded a $1.5 million loss on our equity method investment in BiomEdit, representing our share of the investee’s losses under the HLBV method and the fair value of the additional equity we received in BiomEdit of $1.1 million in the first half of 2023, which was reduced to zero during the period as a result of the application of the HLBV method.

In the nine months ended September 30, 2023, we recorded a $1.5 million loss on our equity method investment in BiomEdit, representing our share of the investee’s losses under the HLBV method and the fair value of the additional equity we received in BiomEdit of $1.1 million in the first half of 2023, which was reduced to zero during the period as a result of the application of the HLBV method.

Under the HLBV method, we absorb losses as a common unit holder prior to preferred unit holders due to a substantive profit-sharing agreement where the preferred unit holders receive preferential distribution rights.

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Loss on Investments

Loss on investments was $6.8 million and $2.1 million in the three months ended June 30, 2024 and 2023, respectively.

The change of $4.7 million was due to fluctuations in the stock prices of our marketable equity securities and a $4.9 million increase in impairment losses recognized on our non-marketable equity securities.

Loss on investments was $9.4 million and $8.5 million in the six months ended June 30, 2024 and 2023, respectively.

The change of $0.9 million was due to fluctuations in the stock prices of our marketable equity securities offset by an $8.3 million increase in impairment losses recognized on our non-marketable equity securities.

Change in Fair Value of Warrant Liabilitie s

The change in fair value of warrant liabilities was $3.2 million gain and $4.5 million loss in the three months ended June 30, 2024 and 2023, respectively, and $4.2 million gain and $3.3 million loss in the six months ended June 30, 2024 and 2023, respectively.

The change in fair value of warrant liabilities is primarily driven by changes in the value of our common stock.

Increases or decreases in the value of our common stock results in a loss or gain, respectively, on the change in fair value of warrant liabilities.

Loss on investments was $6.9 million and $36.3 million for the three months ended September 30, 2024 and 2023, respectively, and $16.3 million and $44.8 million for the nine months ended September 30, 2024 and 2023, respectively.

In the 2023 periods, we recorded higher impairment losses on our non-marketable equity securities compared to the comparable 2024 periods.

Loss on Deconsolidation of Subsidiary

In the third quarter of 2024, we recorded a $7.0 million loss on our deconsolidation of our former foreign subsidiary Altar as a result of a sale.

Change in Fair Value of Warrant Liabilities

The change in fair value of warrant liabilities was a gain of $1.5 million and $1.9 million for the three months ended September 30, 2024 and 2023, respectively, and a gain of $5.7 million and a loss of $1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

The change in fair value of warrant liabilities is primarily driven by fluctuations in the value of our common stock.

Increases or decreases in the value of our common stock result in a loss or gain, respectively, in the fair value of warrant liabilities.

Other Income, Net

Other income (expense), net decreased $4.0 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a $2.3 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $2.3 million increase in the net loss on the change in fair value of convertible notes.

Other income (expense), net decreased $4.9 million in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to a $4.7 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $1.0 million increase in the net loss on the change in fair value of convertible notes.

Other income, net decreased by $1.3 million and $6.2 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarily due to a decrease in sublease rent income as a result of the deconsolidation of Zymergen.

Non-GAAP Information

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We compensate for these limitations by providing a reconciliation of EBITDA and Adjusted EBITDA to their most directly comparable GAAP financial measure.

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

Net loss $ (217,181) $ (173,315) $ (383,092) $ (378,284)

$ (56,403) $ (302,891) $ (439,495) $ (681,175)

Interest income, net (9,251) (15,020) (31,275) (43,914)

Income tax expense 190 67 221 149

Income tax expense (benefit) (375) (22) (154) 127

Depreciation and amortization 17,171 21,060 47,368 57,670

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Loss on investments 6,912 36,324 16,282 44,815

Loss on deconsolidation of subsidiary 7,013 — 7,013 —

Change in fair value of warrant liabilities (1,528) (1,891) (5,701) 1,387

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Adjusted EBITDA (1)

(1) Includes $1.1 million and $1.0 million in employer payroll taxes for the three months ended June 30, 2024 and 2023, respectively, and $2.7 and $3.2 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Impairment expense includes $47.9 million related to goodwill impairment in the three and six months ended June 30, 2024 and $9.0 million related to lab equipment acquired as part of the Zymergen acquisition in the three and six months ended June 30, 2023.

(3) Restructuring charges include $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.

$ (20,014) $ (83,820) $ (236,216) $ (263,598)

(1) All periods include non-cash revenue when earned, including $45.4 million in the three and nine months ended September 30, 2024, recognized pursuant to the termination of revenue contracts with Motif (see Note 14 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

(2) Includes $0.2 million and $1.1 million in employer payroll taxes for the three months ended September 30, 2024 and 2023, respectively, and $2.9 million and $4.3 million for the nine months ended September 30, 2024 and 2023, respectively.

(3) For 2024, includes $47.9 million related to goodwill impairment.

For the three months ended September 30, 2023, includes a $16.2 million impairment loss on lab equipment and a $96.2 million impairment loss on an operating lease right-of-use asset and related leasehold improvements associated with an exited Zymergen leased facility.

For the nine months ended September 30, 2023, includes a $25.2 million impairment loss on lab equipment and a $96.2 million impairment loss on lease assets associated with the exited Zymergen leased facility.

(4) Restructuring charges consist of employee termination costs from the reduction in force commenced in June 2024, as well as the impairment of a right-of-use asset relating to facilities consolidation.

(5) Represents transaction and integration costs directly related to mergers and acquisitions, including:

(i) due diligence, legal, consulting and accounting fees associated with acquisitions, (ii) post-acquisition employee retention bonuses and severance payments, (iii) the fair value adjustments to contingent consideration liabilities resulting from acquisitions, (iv) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery.

Not included in this adjustment are non-cash charges for acquired in-process research and development expenses, which totaled $3.0 million and $4.0 million in the three months ended June 30, 2024 and 2023, respectively, and $19.8 million and $4.0 million in the six months ended June 30, 2024 and 2023, respectively.

Not included in this adjustment are non-cash charges for acquired in-process research and development expenses, which totaled $19.8 million and $4.0 million in the nine months ended September 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

On August 19, 2024, with the approval of our board of directors and shareholders, we effected a one-for-forty (1:40) reverse stock split for our common stock.

Accordingly, all common shares presented herein have been retrospectively adjusted to reflect the reverse stock split.

Sources of Liquidity

Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 1.9 million shares of our Class A common stock.

As of June 30, 2024, we had cash and cash equivalents of $730.4 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

As of September 30, 2024, we had cash and cash equivalents of $616.2 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

Material Cash Requirements

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• upgrade and expand our operational, financial and management systems and support our operations;

• acquire and integrate companies, assets or intellectual property that advance our company objectives;

• potentially acquire and integrate companies, assets or intellectual property that advance our company objectives;

• maintain, expand, and protect our intellectual property;

• implement our restructuring actions.

• continue our restructuring actions.

The following table provides information regarding our cash flows for each period presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2024 2023

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Operating Activities

Net cash used in operating activities for the six months ended June 30, 2024 consisted of net loss of $383.1 million, adjusted for net change in operating assets and liabilities of $6.2 million and non-cash charges of $203.3 million.

The net change in operating assets and liabilities was primarily due to a $10.9 million increase in accounts payable, accrued expenses and other current liabilities primarily due to restructuring-related accruals, a $14.4 million decrease in operating lease right-of-use assets from lease incentives received, partially offset by a $17.0 million decrease in deferred revenue and a $3.9 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $30.2 million of depreciation and amortization, $77.9 million of stock-based compensation expense, $9.4 million loss on investments, $13.1 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $47.9 million of goodwill impairment.

Net cash used in operating activities for the six months ended June 30, 2023 consisted of net loss of $378.3 million, adjusted for net change in operating assets and liabilities of $10.4 million and non-cash charges of $224.6 million.

The net change in operating assets and liabilities was primarily due to a $15.4 million decrease in accounts receivable, a $12.1 million decrease in prepaid expenses and other current assets, a $4.1 million decrease in operating lease right-of-use assets from lease incentives, partially offset by a $4.0 million decrease in accounts payable, accrued expenses and other current liabilities, a $21.4 million decrease in deferred revenue, and a $13.3 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $36.6 million of depreciation and amortization, $134.5 million of stock-based compensation expense, $10.0 million loss on investments including equity method investments, $8.5 million

loss on the change in fair value of contingent consideration liabilities, $16.3 million non-cash lease expense, and $9.0 million impairment loss on assets held for sale.

Net cash used in operating activities for the nine months ended September 30, 2024 consisted of a net loss of $439.5 million, adjusted for a net decrease in cash due to changes in operating assets and liabilities of $91.8 million and non-cash charges of $254.2 million.

The net change in operating assets and liabilities was primarily driven by a $31.1 million decrease in accounts payable, accrued expenses and other current liabilities primarily due to the payment or release of restructuring-related accruals and litigation costs, a $67.8 million decrease in deferred revenue primarily from a one-time release of a deferred revenue balance associated with a terminated customer contract, and a $11.4 million decrease in operating lease liabilities from rent payments, partially offset by a $19.2 million decrease in operating lease right-of-use assets from lease incentives received.

Non-cash adjustments primarily consisted of $47.4 million in depreciation and amortization, $91.8 million in stock-based compensation expense, $16.3 million loss on investments, $20.6 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $47.9 million in goodwill impairment.

Net cash used in operating activities for the nine months ended September 30, 2023 consisted of a net loss of $681.2 million, adjusted for a net increase in cash due to changes in operating assets and liabilities of $12.2 million and non-cash charges of $455.7 million.

The net change in operating assets and liabilities was primarily driven by a $21.2 million decrease in accounts receivable, a $13.6 million decrease in prepaid expenses and other current assets, and a $9.3 million decrease in operating lease right-of-use assets due to lease incentives received, partially offset by a $29.4 million decrease in deferred revenue and a $18.3 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $57.7 million in depreciation and amortization, $187.0 million in stock-based compensation, $46.3 million loss on investments including equity method investments, $10.2 million loss from the change in fair value of contingent consideration liabilities, $24.6 million in non-cash lease expense, and $121.4 million in impairments of long-lived assets.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2024 primarily consisted of purchases of property and equipment of $33.7 million associated with Foundry capacity and capability investments and $5.4 million paid for the acquisition of Zymergen.

Net cash used in investing activities for the six months ended June 30, 2023 primarily consisted of purchases of property and equipment of $33.0 million associated with Foundry capacity and capability investments.

Net cash used in investing activities for the nine months ended September 30, 2024 primarily consisted of $48.8 million in purchases of property and equipment related to Foundry capacity and capability investments, $5.4 million paid for the acquisition of certain Zymergen assets, and $4.0 million in proceeds from the sale of investment securities.

Net cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of $37.4 million in purchases of property and equipment related to Foundry capacity and capability investments and $3.0 million in proceeds from sale of equipment.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2024 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.

Net cash used in financing activities for the six months ended June 30, 2023 primarily consisted of principal payments on finance leases and payment of contingent consideration related to a business acquisition.

Net cash used in financing activities for the nine months ended September 30, 2024 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.

Net cash used in financing activities for the nine months ended September 30, 2023 primarily consisted of principal payments on finance leases and payment of contingent consideration related to a business acquisition.

Critical Accounting Estimates

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Goodwill impairment assessments require a significant amount of management judgment and the use of estimates and assumptions that could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.

During the three months ended June 30, 2024, due to a sustained decrease in the market price of our Class A common stock and market capitalization, we identified that a possible indicator of impairment was present as of June 30, 2024.

During the nine months ended September 30, 2024, due to a sustained decrease in the market price of our Class A common stock and market capitalization, we identified that a possible indicator of impairment was present as of June 30, 2024.

As such, we completed a quantitative impairment test related to our Cell Engineering reporting unit.

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The interim impairment test indicated that the estimated fair value of the reporting unit was less than its carrying value.

As a result, we fully impaired goodwill and recorded an impairment loss of $47.9 million.

As a result, we fully impaired goodwill and recorded an impairment loss of $47.9 million for nine months ended September 30, 2024.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis